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Rhapsody passes million US subscriber milestone
RYAN NAKASHIMA
(The Associated Press)

04:10:00PM (ET) Thursday,December 22,2011.

LOS ANGELES (AP) — Digital music service Rhapsody says it has passed a million paying subscribers in the U.S.

That keeps it in the lead as the most popular subscription service in the country, the company said Thursday. The Seattle-based company turned 10 years old this month.

Rhapsody allows subscribers to listen to as much music as they want for a monthly fee — $10 on all devices or $5 on computers only. Rhapsody also offers a free trial period that includes use on mobile devices.

Rhapsody's subscriber count had hovered around 800,000 for years, but several recent developments re-ignited the business.

In August, its service began being bundled into a cellphone plan for Android phone users on carrier MetroPCS. The plan includes unlimited data, talk, text and music for $60 a month.

In October, it gained other subscribers through its purchase of Napster from Best Buy.

Still, it faces tough competition from new entrant Spotify, the Swedish music service that launched in the U.S. in July. Spotify says it has 2.5 million paying subscribers worldwide.

Rhapsody President Jon Irwin said the company is alone "at this scale with what we believe is a sustainable business model." He said Spotify's rapid growth comes at a steep price because its extended free U.S. trial period on computers brings in some advertising revenue but costs a lot in music royalty payments. Rhapsody's trial is limited to about two weeks.

"The weight of the costs of the free music they're giving to people to get them to convert is clearly dominating their income statement," Irwin said. "I don't have that expense line item that they have."

Spotify declined comment.

Irwin said the recent integration of Facebook with various music services has resulted in many new users trying the service for free but hasn't been all that effective in converting them into paying customers.

He said Rhapsody is focused on growing use on mobile devices. Mobile listening is already the most popular, accounting for 40 percent of listening, compared with 32 percent on computers.

Rhapsody also plans to expand internationally, initially by completing its acquisition of Napster customers in Germany and the U.K., he said.

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